Cash in hand worth the boost from Bush?

ECONOMIC STIMULUS CHECKS

Debt is the first thing 61-year-old Anna Stine of Allentown addressed with her economic stimulus check.

"I used it to pay my electric and phone bills, all that," she said Friday from in front of the PPL building on Hamilton Street while seated in her electric scooter that's adorned with a pair of miniature American flags. Stine said what little she had left over went toward groceries.

"I re-did my bathroom, a small part of it," said Renee Beidleman, 54, who lives in Northampton.

Mike Vargo, 32, used his rebate to replace some windows in his Bethlehem home, but thinks the federal government's largess wasn't the best idea. "We're borrowing more money from future generations," he said.

Like Stine, Beidleman and Vargo, many people are plunking down their rebate checks on utility bills and home improvements instead of big-screen TVs or GPS systems.

And even though others are spending their checks in restaurants, department stores or boutiques, a local economist says the stimulus payments will be no more than a bandage on the suffering economy.

"The rebate is not sufficient to pull the country out of recession. Not even close. Not even in the ballpark," said Kamran Afshar, owner of Bethlehem marketing research firm Kamran Afshar Associates.

According to the U.S. Commerce Department, disposable income -- the money left over after paying taxes -- rose by 5.7 percent in May as $48.1 billion in rebates went out. It represented the largest increase since May 1975.

The stimulus checks helped to increase consumer spending in May by 0.8 percent, the largest increase since November. Consumer spending makes up more than two-thirds of total economic output.

All told, $106.7 billion is being doled out to 130 million households. Checks first went out in late April and all are scheduled to be dispensed by mid-July. When adding businesses into the relief package, the total value reaches $168 billion.

The May numbers showing high disposable income and an increase in sales came to light as the picture grew gloomier on Wall Street. The Dow Jones industrial average dropped almost 360 points Thursday, reaching its lowest level in nearly two years. It dropped an additional 107 points Friday.

Chris Low, chief economist at FTN Financial in New York, said consumer confidence has dropped over the last two months, the same period that the rebates began turning up in mailboxes.

"It tells me if we see this pop in spending, it's not going to last," he said.

The Conference Board's confidence index fell to 50.4 this month after coming in at 58.1 in May.

Balancing the scales somewhat, the unemployment rate in May rose by the largest amount in 22 years, to 5.5 percent, after coming in at 5 percent in April.

Vargo's concern about borrowing from future generations rings true with Afshar. The Bethlehem economist said that while sending rebate checks is a good way to stimulate the economy in the short term, it will ultimately increase the national debt.